Published on June 23, 2022 at 20:31 IST
The Calcutta HC observed that an award holder has the statutory safeguard under Section 36 of the Arbitration and Conciliation Act, 1996 to secure the entire arbitral award amount even during pendency of an application for setting aside of the award and that such a security must be real and not insignificant.
Justice Shekhar B. Saraf was deliberating upon a petition filed under Section 34 of the Act along with an application under Section 36(2) of the act praying for the stay of the award passed by the arbitral tribunal on December 27, 2021.
As per the award, the petitioner was directed to pay pendent-lite and future interest of 9 percent simple interest from the date of the award till the date of payment.
However, the pendent-lite interest would apply to the awarded amount in case the same was not paid within three months commencing from the date of the award.
The arbitral tribunal also warded 25,00,000 rupees towards the reimbursement of litigation and arbitral costs.
Dismissing the contention of the petitioner that the land in possession of the respondents be considered as sufficient security under Section 36 of the act, the court stated,
“Lastly, it is my view that the amended Section 36 of the Act, provides for securing the award holder for the entirety of the award value. It should allso be noted that the security must be real and not illusionary or insignificant.
Thus, the argument by the senior counsel appearing for the petitioner that the land in possession of the respondent must be considered as sufficient security under Section 36 does not hold water.
The land offered for the purpose of security is part of the dispute between the parties. Furthermore, no document has been placed before this court to indicate that the value of the land would cover the entirety of the award. Ergo, the same cannot be accepted for securing the interest of the award holder.”
The Court opined that while the rights of the award holder are not crystallised till the disposal of the application under Section 34 of the Act, however, the award holder still has the statutory safeguard under Section 36 of the act is to be secured in a proper manner for the entirety of the arbitral award.
Thus, the court ruled that the award holder should be secured for the entirety of the amount awarded by the arbitral tribunal along with interest and other costs.
Accordingly, the court directed the petitioner to deposit 50 percent of the arbitral award by way of cash security or equivalent to the satisfaction of the Registrar Original Side, Calcutta High Court.
Further, the court ordered, “Upon such deposit being made, the Registrar Original Side is directed to make a fixed deposit of the said amount with any nationalised bank and keep the same renewed till the disposal of the application under Section 34 of the Act or until further orders of Court.”
“The remaining 50% of the awarded amount shall be secured by way of bank guarantee(s) of a nationalised bank by the petitioner to the satisfaction of the Registrar Original Side, High Court.”
“The above bank guarantee is to be renewed one month prior to its expiry and kept alive till the disposal of the Section 34 application or until further orders in relation to the same, whichever is earlier”.
According, the petition was disposed of with the direction that the aforesaid exercise is to be completed within four weeks.